Employer-provided benefits are a large and growing share of compensation costs. In this paper, I consider three factors that can affect the value created by employer-sponsored benefits. First, firms have a comparative advantage (for example, due to scale economies or tax treatment) in purchasing relative to employees. This advantage can vary across firms based on size and other differences in cost structure. Second, employees differ in their valuations of benefits and it is costly for workers to match with firms that offer the benefits they value. Finally, some benefits can reduce the marginal cost to an employee of extra working time. I develop a simple model that integrates these factors. I then generate empirical implications of the model and use data from the National Longitudinal Survey of Youth to test these implications. I examine access to employer-provided meals, child-care, dental insurance, and health insurance. I also study how benefits are grouped together and differences between benefits packages at for-profit, not-for-profit, and government employers. The empirical analysis provides evidence consistent with all three factors in the model contributing to firms’ decisions about which benefits to offer.

The 1964 Securities Acts Amendments extended the mandatory disclosure requirements that had applied to listed firms since 1934 to large firms traded Over-the-Counter (OTC). We find several pieces of evidence indicating that investors valued these disclosure requirements, two of which are particularly striking. First, a firm-level event study reveals that the OTC firms most affected by the 1964 Amendments had abnormal excess returns of about 3.5 percent in the weeks immediately surrounding the announcement that they had begun to comply with the new requirements. Second, we estimate that the most affected OTC firms had abnormal excess returns ranging between 11.5 and 22.1 percent in the period between when the legislation was initially proposed and when it went into force. These returns are adjusted for the standard four factors and are relative to NYSE/AMEX firms, matched on size and book-to-market equity, that were unaffected by the legislation. While we cannot determine how much of shareholders' gains were a transfer from insiders of these same companies, our results suggest that mandatory disclosure causes managers to focus more narrowly on maximizing shareholder value.